Power generator closures hang on horse-trading

Heavy-polluting power generators have three weeks to indicate whether they will seek to negotiate their closure with the federal government amid doubts a deal will be possible.

On Friday, Resources Minister
Martin Ferguson
and Climate Change Minister
Greg Combet
called for expressions of interest from brown-coal generators seeking to participate in the Contract for Closure program as part of the government’s carbon price scheme.

The government’s aim is to close about 2000 megawatts of generation capacity between 2016 and 2020. But only generators with emissions intensity greater than 1.2 tonnes of carbon per megawatt hour are eligible, limiting the tender to Yallourn, Hazelwood and Energy Brix in Victoria and Playford in South Australia.

While the tender seeks permanent closure, generators may be able to convert to lower-emissions technology.

The government is also keeping secret what it is prepared to pay as that could influence valuations.

It has been reported that International Power has put the value of Hazelwood at $3 billion, Playford’s owner Alinta has indicated it is seeking $250 million and Yallourn’s book value is $1.7 billion. Mr Combet has already flagged a tough position indicating the government doesn’t agree with the Hazelwood valuation.

The National Generators Forum has also questioned whether it was possible for the government to get value for money.

“The NGF questions how competitive any tender process can be, given the handful of potential bidders and the limited capacity they have to offer," it said in its submission on draft carbon price legislation.